Visible Changes Seen In M3 Trends

There have been perceptible changes in the seasonal behavior of monetary and banking variables. This has been the conclusion of a study entitled Monthly seasonal factors of selected economic time series published in the February 1998 bulletin of Reserve Bank of India (RBI).

The study has concluded that the seasonal peak for broad money (M3) has shifted from June (as was the case in 1987-88 to 1989-90) to May (from 1990-91 to 1995-96) and further to April in 1996-97. At the same time, the seasonal trough of M3 has been shifted from August (1987-88 to 1994-95) to December (1995-96 & 1996-97).

As compared with M3, the seasonal pattern in the case of narrow money (M1) is much stronger because of lesser seasonal fluctuations in the time deposits which constitutes nearly 65 per cent share in M3.

Peaks and troughs for demand deposits are in March and August respectively, while those for time deposits are in August and March. However, the seasonal fluctuations in time deposits are lesser than those in demand deposits. The average seasonal factors for bank credit and bank investments move in opposite directions. Average seasonal peak and trough of bank credit occurred n April and August while those of investments occurred in August and March.

Interestingly, the range of difference between the maximum and minimum seasonal factors of bank credit is increasing while those of food credit are decreasing over the years. Seasonal factors of wholesale price index have shown a very consistent behavior since 1987-88 reaching the peak either in August or September end and decreasing from there to reach a seasonal low in February or March.

Most of the subgroups of index of industrial production have strong seasonal pattern closely related to busy and slack seasons of the economy.Since a majority of these series have seasonal peaks in March and troughs in April it may be partly because most firms have their production accounting year ending in March.

Oil and non-oil imports peak in December and March respectively and the trough is in September and April respectively.